3 rd Annual Symposium for Research Administrators Cost Transfer - - PowerPoint PPT Presentation

3rd Annual Symposium for Research Administrators

Cost Transfer Policy

Martha Martin, CRA, Grants Administration, School of Information and Library Science Sarah Van Heusen, MHA, Director of Research Administration, Department of Microbiology and Immunology, School of Medicine

July 29, 2016

Presenters

• Martha Martin, CRA, Contracts and Grants Admin,

UNC SILS

• Sarah Van Heusen, MHA, Director of Research

Administration, Microbiology and Immunology, UNC SOM

*This presentation was modified from the original - presented in 2012 by Vanessa Peoples, former Deputy Director of OSR

• Define cost transfer
• Policy
• Documentation requirements
• Think Like and Auditor
• Justification examples
• Past Audit Findings
• Moving Forward
• Questions and comments

Agenda

What is a cost transfer?

What is a Cost Transfer?

• Cost transfer is an after-the-fact reallocation of

a cost from one source of funding to another

• Examples

– Moving expense from one project ID to

another project ID

– Moving expense to/from a project ID to a non

project ID source

What is a Cost Transfer?

Can be:

• Salary expenditures:

– Labor , including salaries, wages, and benefits – Non-salary expenditures: costs other than salaries wages, and benefits (e.g., chemicals, lab supplies, equipment, travel, internal service provider charges)

What is NOT a Cost Transfer?

• Purchasing card reconciliation
• Interdepartmental billings (ex. DLAM)
• Recoding expense on the same project (ex.

fund, source or department)

UNC Cost Transfer Policy

UNC Cost Transfer Policy

UNC policy requires: – Compliance with federal, sponsor and university policies – Timeliness of transfers (90 days) – Proper documentation – and defines roles and responsibilities

http://research.unc.edu/offices/sponsored-research/policies-procedures/section-500/policy-20/

UNC Cost Transfer Policy

• Office of Management and Budget (OMB): Any costs allocable to a

particular sponsored agreement under the standards provided may not be shifted to other sponsored agreements in order to meet deficiencies caused by overruns or other fund considerations, to avoid restrictions imposed by law or by terms of the sponsored agreement, or for other reasons

• f convenience.
• NIH Grants Policy Statement: Transfers must be supported by

documentation that fully explains how the error occurred and a certification of the correctness of the new charge by a responsible

• rganizational official of the grantee, consortium participant, or contractor

. An explanation merely stating that the transfer was made “to correct error” or “to transfer to correct project” is not sufficient. Transfers of costs from one budget period to the next solely to cover cost overruns are not allowable.

Documentation

Ways to Initiate Cost Transfers

• Correcting journal entry
• Correcting voucher journal entry
• PAAT - retro salary distribution tool

Documentation Criteria

Conformance with university and sponsor policies – allowable, allocable, reasonable, and consistent Timely – should be prepared and submitted as soon as the need for a transfer is identified, but no later than 90 days after the posting is made – The government expects that costs are charged appropriately at the time incurred and that significant adjustments should not be required if adequate financial management practices and policies exist

Documentation Criteria

Fully documented why transferring – Reason for the transfer – Benefit to the receiving project – Allowability and allocability to the receiving project – Reason for timing of transfer Supported by appropriate approvals – Reviewed with PI – Approved by someone of knowledge other than the initiator

Think like an Auditor

Office of Inspector General (OIG) Auditor Perspective

According to Association of College of University Auditors – “Though each sponsoring agency’s OIG develops an annual work plan, universities across the country have consistently received audit finding in a number of key areas:

• Consistent treatment of direct and indirect costs
• Cost allowability
• Cost transfers
• Payroll distribution/effort reporting
• Subrecipient monitoring
• Tracking and reporting cost sharing

Auditors Perspective

• Institutions have a responsibility to use funds in accordance

with applicable law and sponsor terms and conditions.

• Scrutinizes cost transfers closely for indications of cost

misallocation, and often disallows costs transferred into federal accounts on that basis, or because of non- compliance with timing, documentation, and procedural requirements.

• Frequent cost transfers and cost transfers made long after

the original cost is incurred (even if valid) raise questions about the reliability of the institution’s accounting system and internal controls.

Auditors Perspective

• The types of questions raised by auditors include:

– How did the PI know that those supplies benefited the other project? – Did he or she review an expenditure statement or a project budget? – Why was this error not identified in a timely manner?

Allowable Expenses?

Attribution:

• Can you attribute each expense to the specific award?
• Do you review the methodology of splitting expenses within

your lab? Charging personnel:

• How do you allocate staff time, how often is it reviewed and

what do you do about short term reallocation of staff Unallowable practices include:

• Rotating charges between awards
• Spending down an award because it has the largest balance

Accelerated Spending?

• Is the rate of spending tied to the pace of work?
• Does the rapid spending indicate a change in the scope
• f work?
• If spending is slow is there concern about achieving

project goals?

• Good practice is to monitor overall grant spending

against a dollar and time budget?

UNC OIG Audit June 2012

UNC OIG Audit Results

• DHHS OIG Audit
• Reviewed two prior fiscal years (2010 & 2011)
• Areas of Interest:
• Allocation
• Cost Transfers
• Timing of expenses
• Service Centers
• General Use Items

http://www.ncauditor.net/EPSWeb/Reports/Financial/FSA- 2013-6020.pdf

UNC OIG Audit Results

• Reviewed 163 transactions
• Allowable 155 transactions
• Unallowable 8 transactions
• UNC Fined - $352,843 for unallowable costs
• $298K of this total was related to cost transfers
• 164 non salary; 10 salary
• Cost transfers were not adequately documented
• Costs were not reasonable - Duplicate charges
• Costs were not treated consistently - Direct vs indirect

costs

Cost Transfer Justification Examples

Justification Examples

• Questionable Justification – “To correct error.” Or “to transfer

to correct project.”

• Reason – The amount transferred must be adequately justified as

well as the reason for the transfer. What error was made?

• Remedy – Explain with specific detail how the error was made.
• Acceptable Justification – “Incorrect project ID was listed in the

chart field string on the original voucher. The error was caught during reconciliation when we were notified by the department who receive the incorrect charge. This action will apply the charge to the correct project.”

Justification Examples

• Questionable Justification – “To charge appropriate

project.”

• Reason – This does not adequately explain why the wrong project

was charged. Why is the new project being charged more appropriate? How was the transfer amount determined?

• Remedy – Explain why the project being charged is appropriate

and how the amount was determined.

• Acceptable Justification – “To transfer 100% of Chemistry

Storeroom charges for graduate student John James for the month of February, to reflect the project where the supplies were used and the student’s effort is now being charged. The Chemistry Storeroom has been notified of the change in project ID for this student.”

Justification Examples

• Questionable Justification – “To transfer $500 of supply costs to

the appropriate project.”

• Reason – The amount transferred must be adequately justified as

well as the reason for the transfer . Are projects related? Why wasn’t the order charged to the proper project initially?

• Remedy – Explain how the amount was determined and how the

expenditure benefits the project being charged.

• Acceptable Justification – “To transfer 50% of the supplies to the

PI’s new NIH project. Supplies are to be shared equally between the two related projects that used the supplies per lab usage records. The new NIH project was awarded two days after the supplies were

• rdered.”

Justification Samples

• Questionable Justification – “To split maintenance charges between

related projects.”

• Reason – The amount transferred must be adequately justified and
• reasonable. Also, indicate whether the equipment was used to support

the project being charged.

• Remedy – Indicate how the amount transferred was determined and

why the project being charged now wasn’t charged originally.

• Acceptable Justification – “To transfer 50% of the maintenance costs

to the PI’s NSF project. The equipment is to be used equally between the two related projects. The administrator was not informed that the equipment was also going to be used for the NSF award.”

Justification Samples

• Questionable Justification – “To move charge from

department.”

• Reason – The amount transferred must be adequately justified and
• reasonable. Also, indicate how the charge was used to support the

project being charged.

• Remedy – Indicate how the amount transferred was determined and

why the project being charged now wasn’t charged originally.

• Acceptable Justification – “The start date of the grant is December 1,

however the project ID was not established in the financial system until February 15. The PI needed to purchase some materials to begin work on the project in December, thus they were charged to the department until the project was established.

Other Audit Findings – Misuse of NIH Funding

Misuse of NIH Funding

December 2015 - University of Florida To Pay Around $19.875 Million in False Claims Settlement

• the university overcharged hundreds of grants for the

salary costs of its employees, where it did not have documentation to support the level of effort claimed on the grants for those employees Sept 2014 – University of Illinois findings related to cost transfers

• cost transfer on a 6 year grant made 21 days after the

award ended.

Misuse of NIH Funding

2008 – Yale University pay $7.6 Million to settle OIG findings Prosecutors accused Yale of breaking the law by mischarging federal grants in two ways. First, some Yale researchers are said to have improperly transferred grant funds to accounts that were not specifically related to the purpose of the grant. Second, the government alleged some researchers paid themselves for all their summer work, even time and effort unrelated to the grant. Auditors reviewed documentation and emails to support salary cost transfers and emails stated “transfers were necessary to spend down funding”

Yale’s President Response…

"As stewards of public funds, it is our duty to adhere strictly to the regulations."

Yale recognizes the many demands on professors' time, but wants the faculty to shoulder more of the burden of

• compliance. After all, "if you gave your checkbook to

me, you'd like to make sure I spent the money in an appropriate way." That means faculty members now have to add a new skill to their resume: accounting.

Misuse of NIH Funding

SUMMARY OF FINDINGS Although the University developed and implemented adequate written policies and procedures and controls relating to cost transfers and generally justified and supported cost transfers to NIH grants, our analysis of selected transactions found that staff did not always follow those procedures and cost transfers were not always documented and authorized as required. Federal and University policies and procedures allow cost transfers to funded projects when they are reasonable, allowable, allocable, adequately supported, and timely and require adequate internal controls for monitoring grant accounts. We found that one transfer lacked required documentation to explain how the error occurred and four late transfers were made without completing or properly authorizing the required form for University oversight and approval. Ultimately, supplemental explanation and documentation supported the allowability and allocability of these cost transfers.

Misuse of NIH Funding

SUMMARY OF FINDINGS University of Chicago – Although the University developed and implemented adequate written policies and procedures and controls relating to cost transfers and generally justified and supported cost transfers to NIH grants, our analysis of selected transactions found that staff did not always follow those procedures and cost transfers were not always documented and authorized as required. Federal and University policies and procedures allow cost transfers to funded projects when they are reasonable, allowable, allocable, adequately supported, and timely and require adequate internal controls for monitoring grant accounts. We found that one transfer lacked required documentation to explain how the error occurred and four late transfers were made without completing or properly authorizing the required form for University oversight and approval. Ultimately, supplemental explanation and documentation supported the allowability and allocability of these cost transfers.

Cost Transfer Audits Findings

• Georgia Institute of Technology

2009

• Yale University

2008

• Thomas Jefferson University

2007

• “University generally documented cost transfers to federally funded grants in

accordance with Federal requirements. Since 1996, NIH had designated the University as high risk because of questionable accounting for grant fund expenditures, specifically cost transfers. In 2000, the University entered into an institutional integrity agreement with HHS. The agreement stated that the University adopted new policy and procedures for cost transfers.”

• California Institute of Technology

2007 “found a lack of monthly PI monitoring of Federal grant expenditures, an excessive number of cost transfers involving 8 of the 12 months of one individual’s annual salary. Establish procedures that require that transfers of costs from overspent Federal grants to other sponsored projects require formal written justification and certification by the PI, the Division Chair, and the Associate Director of Project Accounting that the transfer of cost is proper and benefits the receiving award”

Findings of Non- compliance

Institution Date Issues Settled/Agency Settlement

Northwestern 2004/ NIH Institutional base salary; K award; Certifier Assignment

$5.5 million

Johns Hopkins University Feb 2004/ NIH Faculty time & effort overstated $2.6 million Harvard University July 2004/ NIH Government billed for salaries & expenses unrelated to federal grants; self reported $3.3 million Florida International University Feb 2005/ Dept of Energy Effort reporting, cost transfers, payroll dist. $11.5 million University of Alabama at Birmingham Apr 2005/ NIH Research work overstated; Medicare billed for research $3.9 million The Mayo Clinic May 2005/ NIH,

• thers

Cost allocation, cost transfers, inadequate accounting system $6.5 million

• St. Louis University

July 2008/ NIH, CDC, HUD Supplemental compensation, effort reporting $1 million Yale University Dec 2008/ Multiple agencies Cost transfers, summer salary charges, effort reporting $7.6 million Duke University Jan 2009/ NIH Direct charging of administrative and clerical costs Final settlement < recommended $ by the auditor

Penalty for Misuse of NIH Funding

Moving Forward

Prevent Cost Transfers

Know spending authority for each project

• What is allowable on the project

Review budget and spending authority with PI at beginning of project and a minimum of four times throughout the fiscal year Work Proactively:

• Status of all active accounts
• Charges
• Miscellaneous items
• Recognize allocation disbursement methods of charges
• Understand effort commitments
• Contact ORS with questions
• Advise ORS of any inquiry from external

Steps to Mitigate Cost Transfers

Know the terms of awards. http://grants.nih.gov/grants/policy/nihgps_2003/index.htm Know Activities/Changes Requiring NIH Prior Approval For example, 25% reduction in effort, change in scope, transferring work off-site. Know When Reports Are Due Data Management – Record Retention Facilitate PI Management of Grant Account Know/implement the NIH Cost Principles Charges must be reasonable, allowable, allocable & conform with institutional policies Provide oversight & monitor collaborator (sub-recipient) activities Personnel Management Collect/submit COI forms Timely completion of semi-annual effort reporting

Steps to Mitigate Cost Transfers

• Document transactions at the time they occur

– Align recording of expenses with budget and budget justifications – Communicate with principal investigators regularly (meet and/or send reports via email)

• Project reconciliations

– Monthly but no less than quarterly

Questions????